Bethany McLean writes a fascinating piece on Goldman Sachs. Side note, this article features plenty of information on Buffettâs investment in Goldman Sachs.
A big thanks to Janet Tavakoli for recommending this article.
Introduction (Via Vanity Fair)
One of the biggest disconnects on Wall Street today is between the way Goldman Sachs sees itself (theyâre the smartest) and the way everyone else sees Goldman (theyâre the smartest, greediest, and most dangerous). Questioning C.E.O. Lloyd Blankfein, C.O.O. Gary Cohn, and C.F.O. David Viniar, among others, the author explores how their firm navigated the collapse of September 2008, why it has already set aside $16.7 billion for compensation this year, and which lines itâs accused of crossing.
Lloyd Blankfeinâwho was born poor in the South Bronx, put himself through Harvard, and became the C.E.O. of Goldman Sachs in 2006, after 24 years at the firmâis a history buff, a lawyer, a wordsmith, and something of an armchair philosopher. On a Thursday in Octoberâthe very day when the firm announced it had made $8.4 billion in profits so far this yearâhe speculates whether Goldman would have survived the financial conflagration in the fall of 2008 entirely on its own, without any kind of help, implicit or explicit, from the government. âI thought we would, but it was a hell of a higher risk than I was happy with,â he says, sitting in his 30th-floor office in Goldmanâs old headquarters, at 85 Broad Street, in Lower Manhattan. âAs a result of actions taken [by the government], we were better off than we otherwise would have been. Was it dispositive? I donât know. I donât think so ⌠but I donât know.â
He adds, âIf you ask, in my heart of hearts, do I think we would have failed ⌠â He pauses, then pulls out his trump card: at the height of the crisis, Warren Buffett agreed to invest $5 billion in Goldman Sachs.
Buffett, the venerated Nebraska investor, is famously reluctant to put money into Wall Street firms. But he has a long history with Goldman. As a 10-year-old he went to New York with his father, a broker in Omaha, and they stopped by Goldman Sachs to visit Sidney Weinberg. As Goldmanâs leader from 1930 to 1969, Weinberg helped build the firm into the powerhouse it became. âFor 45 minutes, Weinberg talked to me as if I were a grown-up,â Buffett likes to recall. âAnd on the way out he asked me, âWhat stock do you like, Warren?ââ In later years Buffett liked to cite Byron Trott, who until recently worked in Goldmanâs Chicago office, as one of the few investment bankers worth his salt.
Additional Excerpts (Via Vanity Fair)
And so, when Trott asked Buffett if he would be interested in investing in Goldman during the frenetic days after Lehman Brothersâ bankruptcy, Buffett thought about it, and on Tuesday, September 23, he and Trott hammered out a deal. In a very briefâand very Buffettâcall that afternoon with Blankfein, Trott, and then co-president Jon Winkelried, Buffett said he would invest $5 billion in exchange for a hefty 10 percent dividend and rights to buy additional stock over the next five years at a price of $115 a share. âIâm taking my grandkids out to Dairy Queen,â he told the Goldman men. âCall me and let me know what you want to do.â
Goldman accepted Buffettâs tough terms, and thanks to the investment was able to raise another $5.75 billion, by selling stock to other investors. Blankfein says the firm could have raised multiples of that but didnât need more money. And Buffett has said that while no one could ever understand the balance sheet of any Wall Street firm, he has confidence that Blankfein is both very smart and very conservative. But there was another reason he invested: âIf I didnât think the government was going to act, I would not be doing anything this week,â he explained to CNBCâs Becky Quick. âI might be trying to undo things this week.â
Click Here To Read: The Bank Job
Miguel Barbosa
Founder of
http://www.simoleonsense.com/
A big thanks to Janet Tavakoli for recommending this article.
Introduction (Via Vanity Fair)
One of the biggest disconnects on Wall Street today is between the way Goldman Sachs sees itself (theyâre the smartest) and the way everyone else sees Goldman (theyâre the smartest, greediest, and most dangerous). Questioning C.E.O. Lloyd Blankfein, C.O.O. Gary Cohn, and C.F.O. David Viniar, among others, the author explores how their firm navigated the collapse of September 2008, why it has already set aside $16.7 billion for compensation this year, and which lines itâs accused of crossing.
Lloyd Blankfeinâwho was born poor in the South Bronx, put himself through Harvard, and became the C.E.O. of Goldman Sachs in 2006, after 24 years at the firmâis a history buff, a lawyer, a wordsmith, and something of an armchair philosopher. On a Thursday in Octoberâthe very day when the firm announced it had made $8.4 billion in profits so far this yearâhe speculates whether Goldman would have survived the financial conflagration in the fall of 2008 entirely on its own, without any kind of help, implicit or explicit, from the government. âI thought we would, but it was a hell of a higher risk than I was happy with,â he says, sitting in his 30th-floor office in Goldmanâs old headquarters, at 85 Broad Street, in Lower Manhattan. âAs a result of actions taken [by the government], we were better off than we otherwise would have been. Was it dispositive? I donât know. I donât think so ⌠but I donât know.â
He adds, âIf you ask, in my heart of hearts, do I think we would have failed ⌠â He pauses, then pulls out his trump card: at the height of the crisis, Warren Buffett agreed to invest $5 billion in Goldman Sachs.
Buffett, the venerated Nebraska investor, is famously reluctant to put money into Wall Street firms. But he has a long history with Goldman. As a 10-year-old he went to New York with his father, a broker in Omaha, and they stopped by Goldman Sachs to visit Sidney Weinberg. As Goldmanâs leader from 1930 to 1969, Weinberg helped build the firm into the powerhouse it became. âFor 45 minutes, Weinberg talked to me as if I were a grown-up,â Buffett likes to recall. âAnd on the way out he asked me, âWhat stock do you like, Warren?ââ In later years Buffett liked to cite Byron Trott, who until recently worked in Goldmanâs Chicago office, as one of the few investment bankers worth his salt.
Additional Excerpts (Via Vanity Fair)
And so, when Trott asked Buffett if he would be interested in investing in Goldman during the frenetic days after Lehman Brothersâ bankruptcy, Buffett thought about it, and on Tuesday, September 23, he and Trott hammered out a deal. In a very briefâand very Buffettâcall that afternoon with Blankfein, Trott, and then co-president Jon Winkelried, Buffett said he would invest $5 billion in exchange for a hefty 10 percent dividend and rights to buy additional stock over the next five years at a price of $115 a share. âIâm taking my grandkids out to Dairy Queen,â he told the Goldman men. âCall me and let me know what you want to do.â
Goldman accepted Buffettâs tough terms, and thanks to the investment was able to raise another $5.75 billion, by selling stock to other investors. Blankfein says the firm could have raised multiples of that but didnât need more money. And Buffett has said that while no one could ever understand the balance sheet of any Wall Street firm, he has confidence that Blankfein is both very smart and very conservative. But there was another reason he invested: âIf I didnât think the government was going to act, I would not be doing anything this week,â he explained to CNBCâs Becky Quick. âI might be trying to undo things this week.â
Click Here To Read: The Bank Job
Miguel Barbosa
Founder of
http://www.simoleonsense.com/
